Section 271FA: Penalty for Failure to File Statement of Financial Transactions (SFT)
Section 271FA of the Income-tax Act, 1961 deals with delayed or missing statements of financial transactions and reportable accounts. Its historical daily penalties must now be read alongside the revised, notice-based penalty in Section 454 of the Income-tax Act, 2025, as amended by the Finance Act, 2026.
1. What does Section 271FA mean?
Section 271FA is a penalty provision of the Income-tax Act, 1961. It applies to a person who is obliged to furnish a statement of financial transaction or reportable account under Section 285BA(1) but does not furnish that statement within the prescribed period. The penalty is directed by the prescribed income-tax authority.
Section 285BA creates the reporting obligation for prescribed financial transactions or reportable accounts recorded or maintained by specified persons and institutions. Rules 114E and 114F to 114H of the Income-tax Rules, 1962 address specified reporting and reportable-account requirements, as applicable.
Operative substance of Section 271FA under the 1961 Act
Where the statement is not furnished by the time prescribed under Section 285BA(2), the prescribed income-tax authority may direct payment of Rs. 500 for every day the failure continues. Where a notice under Section 285BA(5) specifies a further filing period and the person still fails to comply, the statutory proviso prescribes Rs. 1,000 per day beginning on the day immediately following expiry of that notice period.
These are two stages of the same default; they should not be mechanically added as two simultaneous daily penalties for the same post-notice days.
2. Section 271FA penalty rates and examples
| Situation | Penalty under Section 271FA (1961 Act) | Trigger |
|---|---|---|
| Statement not furnished by the prescribed due date | Rs. 500 per day | Continuing failure after prescribed deadline |
| Statement not furnished within the period specified in a notice | Rs. 1,000 per day for subsequent default | Day after notice period expires |
| Inaccurate SFT or due-diligence failure | Separate rules, generally Section 271FAA | Not the same default as non-filing under 271FA |
Example 1: If a filing default governed by the 1961 Act continues for 12 days before any notice-stage escalation, the illustrative amount at Rs. 500 per day is Rs. 6,000.
Example 2: If a notice period has expired and the default continues for a further 15 days, the illustrative post-notice amount is Rs. 15,000 (15 × Rs. 1,000), in addition to any properly computed earlier-stage liability. Actual computation depends on the relevant dates and applicable law.
3. Who must file an SFT or reportable-account statement?
The obligation is not imposed on every taxpayer merely because the taxpayer undertakes a large transaction. It generally falls on prescribed reporting persons or entities such as specified banks, financial institutions, registrars, companies, mutual funds and other reporting persons where the applicable transaction category and threshold are met.
- Form 61A: Used for prescribed statements of financial transactions under Rule 114E, subject to the relevant reporting requirements.
- Form 61B: Used for prescribed reportable-account reporting under the applicable rules, including financial account due diligence.
- Due dates: Form 61A is generally due on 31 May following the financial year under the 1961 Act rules. Reportable-account reporting has its own prescribed requirements; check the applicable rule, form, notification and reporting year.
- Reporting portals: Reporting entities should use the Income Tax Department's current reporting/e-filing systems and preserve acknowledgement and validation records.
For reporting categories, thresholds and technical filing instructions, consult the official SFT filing guide and the Income Tax e-Filing portal.
4. New law: Section 454 of the Income-tax Act, 2025
Section 508 of the Income-tax Act, 2025 addresses the obligation to furnish statements of financial transactions or reportable accounts. It broadly corresponds to Section 285BA of the 1961 Act. Section 454 is the corresponding penalty provision, but its final 2026 wording differs materially from the 1961 Act.
| Provision | 1961 Act regime | 2025 Act, as amended by Finance Act 2026 |
|---|---|---|
| Reporting obligation | Section 285BA | Section 508 |
| Late filing before notice-stage default | Section 271FA: Rs. 500/day | No equivalent initial Rs. 500/day limb in substituted Section 454 |
| Default after notice expires | Section 271FA: Rs. 1,000/day | Section 454: Rs. 1,000/day, capped at Rs. 1,00,000 |
| Inaccurate statement | Section 271FAA | Separate provision under Section 455, as applicable |
Whether a particular default falls under the 1961 Act or 2025 Act requires checking the relevant reporting period, commencement, savings and transition rules. The figures above should not be combined across regimes.
5. Practical compliance and penalty proceedings
- Verify the obligation: Identify the reporting entity, transaction category, threshold, reporting period and prescribed form.
- Check the deadline: Confirm the due date and any valid extension or notification.
- File or correct promptly: Submit the required statement and resolve validation errors; retain acknowledgements.
- Respond to notices: Note the exact date of service and the last date specified in any notice under Section 285BA(5) or Section 508(7).
- Preserve evidence: Keep filing logs, portal error records, correspondence and records relevant to any statutory defence.
- Review the penalty order: Check the statutory provision, authority, period of default, calculation and available remedies for the relevant regime.
Section 273B of the 1961 Act contains reasonable-cause relief for certain specifically listed penalties. Section 271FA is not generally included in that list; therefore, do not assume an automatic Section 273B defence. Other statutory or procedural grounds must be assessed on their facts.
6. Legislative history of Section 271FA
The source provision reflects the following amendments:
- The Finance Act, 2013 substituted Section 271FA with effect from 1 April 2014.
- The Finance (No. 2) Act, 2014 updated references from the former annual information return to statements of financial transactions or reportable accounts, effective 1 April 2015.
- The Finance Act, 2018 raised the original daily penalty from Rs. 100 to Rs. 500 and the post-notice rate from Rs. 500 to Rs. 1,000, effective 1 April 2018.
- The Income-tax Act, 2025 introduced Section 454, subsequently substituted by the Finance Act, 2026 with effect from 1 April 2026 to create the capped, notice-based penalty described above.
7. Frequently asked questions
What is the penalty under Section 271FA?
For a failure governed by the Income-tax Act, 1961, Section 271FA provides Rs. 500 for each day of continuing failure and Rs. 1,000 per day after the deadline in a notice under Section 285BA(5).
Does the Rs. 500 per day penalty continue under the Income-tax Act, 2025?
No. Section 454 as substituted by the Finance Act, 2026 provides a notice-based Rs. 1,000 per day penalty, subject to a Rs. 1,00,000 cap, for the new regime.
Is Section 271FA the same as Section 271FAA?
No. Section 271FA addresses non-filing or delayed filing; Section 271FAA concerns inaccurate information and specified due-diligence failures.
When is an SFT ordinarily due?
Under the rules applicable to the 1961 Act, Form 61A is generally due by 31 May following the relevant financial year, subject to the applicable reporting category and any valid extensions.
8. Official law and guidance
- Income Tax Department: Section 271FA (1961 Act)
- Income Tax Department: Section 285BA
- Income Tax Department: Section 508 (2025 Act)
- Finance Act, 2026 (official enacted text, Section 454 amendment)
- Income-tax Act, 2025 as amended by Finance Act, 2026
- Official SFT filing guide
- Income Tax Department: Section 271FAA
This article is general legal information. Verify the relevant statutory version, rules and notifications before taking action in a specific matter.